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China Luxury Advisors' thought leadership.

Philip Guarino | 30 March 2015

CHANEL’s recent decision to increase prices in Europe by 20 percent and lower them in China raised eyebrows throughout the global luxury industry. Ostensibly this move was designed to “align” prices in anticipation of an international e-commerce push. Coming in the wake of the Euro’s sharp devaluation since mid-2014, which accelerated significantly in the month of March, CHANEL’s move drove home the fact that pricing is key in every industry. Winning pricing strategies involve extracting the maximum value a customer is willing to pay (a basic tenet of economics).

But is this latest move a strategic one, which will generate sales and build loyalty, or is it an opportunistic, tactical response? And should other brands follow CHANEL’s lead?

One might first look at the current economic backdrop and its impact on the luxury industry. The industry had enjoyed several years of booming sales worldwide, largely driven by the traveling Chinese consumer. Together with China, the fast-growing economies of Brazil and Russia bucked the trend of lackluster sales in a moribund Europe and a post-2008 United States. However, 2014 brought significant challenges to an already complex market. The first seismic shift was China’s ferocious crackdown on corruption, which severely impacted hard luxury sales, particularly those of watches, spirits, and anything considered “bling.” At the same time, Chinese consumers evolved. They began to travel less in groups, visit new destinations, and develop different brand interests.

The other darlings of the luxury industry, Russia and Brazil, also stumbled in 2014, crimping the performance of several firms that were overly dependent on either consumer. The sharp devaluation of the Russian ruble saw double-digit drops in tourism to key cities and caused local consumption to plummet. Brazil’s economy also showed a significant slowdown, followed itself by a significant devaluation against the US Dollar. Brazil’s outbound tourism continues to grow, albeit at a slower pace.

From a policy standpoint, China’s growth is becoming more subdued and the requirement for the government to ensure growth while avoiding bubbles is strong. Although a strong US Dollar and weaker Euro remain probable scenarios in the medium term, China’s current position is far from predictable — just as its policies are opaque. One unknown is whether economic uncertainty (or Beijing itself) will drive a depreciation of the Renminbi. In much the same way it was fully unexpected in Russia, a devaluation of the RMB cannot be entirely discounted. Were this to happen (in a way that would most likely be far less dramatic than in Russia), it would throw a very large wrench into the luxury industry’s overall performance.

For the moment, China’s global consumers remain one of two bright spots for the luxury industry, with the other being the United States. While brands, from time to time, discuss the impact of tourism on their international business, what is discussed less openly is that most China operations are not profitable. Although 100 percent of China investment is made in-market, over 75 percent of Chinese consumers buy abroad. And while domestic consumption has contracted, purchases overseas continue to grow.

Currently, Chinese consumers are driven by a number of factors – not just price – when making purchasing decisions. Service, trust, experience and perceived novelty also encourage Chinese consumers to purchase abroad. Even with a 20 percent price hike in Europe, these factors will still make it more attractive for Chinese consumers to purchase in the Eurozone. But – at the same time – the price increase will dissuade a Russian rebound.

The bigger question remains: will a reduction in price in China release the genie in the bottle, stimulating local demand and delivering better performance from Chinese business units? It’s unlikely that this alone will change the entrenched behavior of the majority of Chinese luxury consumers. One possibility is that it could backfire, eroding the perceived value of the brand, and negatively impact the performance of other important markets.

The “not-so-secret” secret of the luxury industry is that many brands are simply overextended in the domestic Chinese market. Having expanded rapidly in the wake of the 2008 financial crisis – where China was seen as a counterweight to struggling traditional markets – many firms are laden with expensive real estate and unprofitable locations. As the industry focus has moved from one of sales growth to one of profitability, in 2015 we will most likely see slimmer infrastructure in China with brands “rationalizing” their networks.

In this context, big price cuts seem desperate and reactive. By the same token, while price increases in Europe will bring more profitability to European locations via Chinese visitors, basing strategy on one of the most volatile stores of money – currency — is a risky approach indeed.

At the same time, an international development strategy cannot be based on one single nation alone; it requires a more nuanced and comprehensive approach in order to protect the integrity of a brand’s entire international customer portfolio. This is even more crucial amid against an uncertain economic backdrop.

Luxury executives would be better advised to take a broader, more long-term view of how to serve their key global consumers (whether Chinese or other) with a greater emphasis on cross-border e-commerce and m-commerce, customer relationship management (CRM) and technology. Additionally, executives should consider international brand-building activities that more accurately appeal to the current behavior of the global luxury consumer, and rely less on the traditional “modus operandi” of the luxury industry.

This challenge in particular remains largely unaddressed in the boardrooms of Paris, Milan, and London. Adjusting pricing is not a proactive strategy but a reactive tactic — and an uncertain one at that.

Avery Booker | 23 March 2015

One of the biggest stories to come out of the global luxury industry last week was Chanel’s decision to increase prices for some handbags in Europe while lowering prices in mainland China. This move, which will take effect on April 8, is aimed at fighting a flourishing gray market and narrowing the price gap between China and Europe, which in some cases makes items up to 70 percent more expensive in China than in the EU.

Chanel isn’t the only brand spurred into action by currency fluctuations, rampant gray market sales in China, and a yawning global price gap. Last week, Tag Heuer said it would cut prices 8 percent in Switzerland, China, and the US, and 13 percent in Hong Kong to combat a price differential exacerbated by the recent Swiss currency revaluation. Other brands to recently announce price adjustments include Cartier and Patek Phillippe, and this could just be the tip of the iceberg.

However, price drops alone won’t cause a massive reversal of fortunes for luxury brands in mainland China. Despite photos of lines forming outside Chanel stores in China last week (in all likelihood mostly populated by gray market sellers checking prices) and articles predicting a rebound for the brand, the reasons Chinese shoppers make roughly 70 percent of luxury purchases overseas are myriad, with pricing just one piece of a much bigger puzzle.

In many ways, the choice to buy luxury goods in Hong Kong, Japan, South Korea, or Europe or the US is entrenched — it’s simply what one does on overseas trips, which are far more accessible for a growing number of mainland Chinese. Middle-class workers save up for big-ticket items to bring back to China (whether for themselves, friends and family, or to sell online). Meanwhile, the most affluent consumers (the VIPs so coveted by the likes of Chanel in China) are spending an ever greater amount of time and money abroad. As such, a price drop in Shanghai don’t mean anything to someone who actively prefers to shop in Seoul or Seattle.

Right now, some of the most fervent Chinese buyers of luxury goods are the US or Europe-based children of high-profile figures — who themselves have cut back on conspicuous consumption at home. Pricing adjustments may cause a a bump in sales of small, lower-priced accessories in mainland China, since middle-class shoppers can’t justify an intercontinental trip to save a couple thousand yuan, but those overseas rich kids won’t travel all the way home to shop at Chanel.

The factors that have long driven overseas purchases — greater prestige and “face,” better service and product selection, privacy and anonymity, lower taxes and, yes, prices — are structural and set in stone. Quite simply, China’s most active luxury consumers are accustomed to buying abroad and see no compelling reason to stop – unless price is their only concern, which is the case for some gray market sellers or less affluent buyers. (Who were never core consumers for the brands anyway.)

Although Chanel’s high-profile move to unify pricing worldwide is a good step, and more brands will undoubtedly follow suit, it may be too little, too late. Brands really should have moved to make prices more consistent before regular price increases in 2013 and 2014 and the ongoing anti-corruption crackdown sent China’s wealthiest consumers on a permanent overseas shopping trip.

sagebrennan | 16 March 2015

It’s a common sight for Susan Vance, marketing and sponsorship director for the L.A. mall, and getting much more so. Last year, about 300 buses stopped there. They are already approaching half that so far this year, the result of a boom in Chinese tourism and of a concerted effort by the Beverly Center to cash in on that growth.

This program has been so beneficial,” Vance said. “If we missed (this trend), we would have done a disservice to our stores.

China Ready

Last year, 686,000 Chinese visitors came to Los Angeles, up more than five- fold from 2013, when L.A. saw 116,000, according to the Los Angeles Tourism and Convention Board.

Vance said the Beverly Center anticipated that surge and started planning in 2013. “We saw it coming, and it was either you get on board now or you’re not going to be China ready,” she said. At the time, tourists from Australia were the mall’s No. 1 visitor. Now, tourists from China rank first by a wide margin, Vance said.

The Beverly Center’s program has several components. During busy shopping periods, such as the recent lunar new year season, the mall has as many as four in-house consultants – called China Luxury Advisors – who handle everything from translating written materials such as mall directories to managing the Beverly Center’s account on Weibo, China’s version of Twitter. They also communicate with tour operators – often through Chinese messaging service WeChat – to find out when a busload of tourists will arrive. (Operators often give little notice.)

The mall also hired several Mandarin-speaking guest services agents, who often serve as the first point of contact for Chinese tourists coming off a tour bus.

Mall retailers also have made efforts to be prepared for Chinese visitors. Courtney Saavedra, director of marketing and public relations for retailer Kitson, said it hired a Mandarin-speaking sales associate at its Beverly Center boutique several months ago to meet the demand. The Beverly Center also takes things a step further with an exclusive partnership with USC and UCLA to target Chinese students. The mall offers free shuttle services for back-to-school shopping events and, more recently, partnered with Pasadena’s East West Bank to host a job-readiness and networking event at the mall.

Avery Booker | 16 March 2015

Less than a year after the likes of Burberry, L’Occitane, and Estée Lauder launched official “flagships” on the platform, this month Alibaba-owned e-tailer Tmall announced new “invite-only” regulations that limit new stores to hand-picked brands. These new regulations present an unexpected obstacle for companies debating whether to join the platform, which – despite concerns about gray market and counterfeit vendors – is an increasingly effective way to tap emerging consumers throughout China.

Announced on March 2, Tmall’s new regulations come at a time when the e-tail giant (and parent company Alibaba) are under pressure to address continued sales of counterfeits by Tmall vendors, as well as allegations of “brushing” (fake sales) on the site. In response, Tmall enacted the invitation-only policy and laid out plans to put in place an anti-brushing mechanism, with Alibaba saying it will “utilize technology like data mining and big data to scrub our platforms of these activities.”

While it remains to be seen whether these are temporary measures, the fact is that brands now need to contend with the new regulations – complicating an already challenging e-commerce market.

Although the number of high-profile Western brands selling on Tmall remains relatively low, interest has only increased in the past year in the wake of Alibaba’s historic IPO, particularly among smaller boutique brands. As such, these new regulations put small brands in a tough situation – since they could, until recently, sign up on their own via Tmall Global yet now must use authorized “Tmall Partners” (TPs), who have existing relationships with Tmall and can smooth the path to gaining an invitation.

This adds two complications into the mix: cost and trust. An entire cottage industry of Tmall Partners now exists, with a multitude of large and small players in the space. For smaller brands, or those newer to the China market, this means finding a cost-effective and trustworthy Tmall Partner is crucial to save precious budget and ensure the partner has the brand’s best interest in mind.

While no shortcut to finding the right partner currently exists, the best way to move ahead is to get referrals from existing networks. If interested in finding a Tmall Partner without going it alone, we encourage you to email renee [at] chinaluxuryadvisors [dot] com for introductions.

As it turns out, they didn’t need to wait long: in the past four months, applications for new US visas have jumped a jaw-dropping 68 percent. Los Angeles destinations frequented by Chinese tourists recorded strong sales growth throughout December and January (and well into February), with two extremely strong weeks around the Chinese New Year holiday.

VisitCalifornia, the state tourism board, is keenly aware of the China opportunity, and announced that it will double its marketing budget to $100 million this year, following the passing of the Dream Big Dividend in 2014.

VisitCalifornia outlined its plans for the future at the recent Outlook Forum, at which China played a starring role, with VisitCalifornia identifying it as one of its top three priority markets going forward. Other markets deemed “Top-Tier” for California are Mexico, Brazil, the UK, and Australia.

But it is China that is seen as having central importance to California tourism growth in 2015. According to Brand USA, the number of Chinese tourists visiting the US will more than double in the next five years, surpassing 4 million visits. Recent research by VisitCalifornia and PhocusWright found that 60 percent of Chinese respondents listed the United States on their destination wish list – more than any other country.

As VisitCalifornia looks for new ways to boost international marketing efforts, the organization is adapting five key trends – culinary, family, outdoor, luxury, and entertainment – to each of its key markets this year.

In addition to boosting advertising and media efforts, VisitCalifornia is taking the innovative approach of creating compelling video content that communicates key messages about California, driving home the idea of the state as an aspirational destination.

There are signs that recent efforts are working. VisitCalifornia’s Dream365 YouTube project, highlighting 22,270 hours of content engagement, resulted in 821 million impressions and 10 million video views. As part of this project, VisitCalifornia is creating custom television shows and purchasing relevant clips from content creators. Going forward, look for VisitCalifornia to expand this project to China and partner with Chinese video companies.

Although many — if not most — global tourism boards are courting the growing number of Chinese international travelers, VisitCalifornia stands out by its creativity and forward-thinking nature, constantly finding fresh ways to stand out in a noisy market and engage a dynamic, fast-growing consumer demographic.

Philip Guarino | 02 March 2015

2014 proved to be a challenging year for Italy. According to Global Blue, luxury spending in Italy dropped 3 percent last year, due in large part to the country’s exposure to Russian tourism. Political turmoil and an ensuing devaluation of the Ruble caused a significant decrease in the number of Russian visitors to Italy, with spending by Russians plummeting 16 percent.

However, Chinese tourists proved a bright spot in Italy last year, with arrivals increasing 11 percent — lower than other leading nations, but still a positive increase. Meanwhile, spending by Chinese tourists in Italy rose 13 percent in 2014, meaning that Chinese travelers now account for 25 percent of all luxury spending in Italy, more than any other country. But amid this momentum, what does 2015 portend? And is Italy–and Italian firms–ready?

Ready or Not

Over one million Chinese tourists are expected to visit Italy for this year’s Milan Expo, at which China’s pavilion is the largest, and the number of businesses represented the greatest, among all nationalities. This will bring a tremendous influx of visitors, which, if estimates prove correct, will provide a significant boost to the luxury and tourism industries alike.

In addition, one important development will impact Chinese tourism to Italy. The significant drop in the Euro since its high in May 2014 will make an Italian holiday 20 percent cheaper. As a result, tour operators in China are already reporting a strong increase in demand for European destinations. However, as often is the case in economics, currency devaluations only provide temporary boosts, meaning that Italy (and its companies) cannot rely on a weak Euro alone if it hopes for long-term gain from the worldwide boom in Chinese overseas travel.

On an official level, Italy has improved some practices to stimulate Chinese tourism. In particular, its visa application process has been streamlined and the country – along with France — now has one of the most “user-friendly” procedures in the Schengen zone.

Yet several factors constrain Italy’s growth. The first regards connectivity. Italy currently only has 28 direct flights per week to China, far less than France and Germany. Alitalia’s recent announcement to reopen flights to Shanghai (three times per week) is perhaps “too little, too late” for a rapidly growing market.

Second, despite some improvement, in general “China-readiness” remains low among Italian firms. A lack of Chinese translations, Mandarin-speaking salespeople, and amenities (wifi in airports, retail locations and boutiques) considered basic elsewhere, provide a sub-optimal environment for Chinese tourists.

What can Italian luxury firms do?

C-level luxury executives need to understand that Chinese tourists don’t just provide one-time sales to Italian cash registers; they are a crucial component of brand building. Italian boutiques are a valuable touchpoint for customers to best experience a brand and its heritage. Understanding that this customer is global (and visits to boutiques in Milan will eventually impact the success of a brand in China as well) is critical.

Most Italian luxury firms today take a passive and purely tactical approach to tourist engagement. Their efforts (if any) tend to focus on influencing purchases locally via tour guide commissions and/or advertising in local travel publications. Yet this also needs to be complemented by other efforts. Engaging with consumers in China, before they depart, via social media, forums and blogs can be a powerful way to engage the traveling consumer. This is particularly important given the shift toward individual travel, where research and booking is done online. Unfortunately, most luxury firms see these activities as tasks for the domestic Chinese market. With Chinese consumers now making an estimated 80 percent of luxury purchases abroad, this strategy clearly demands a rethink.

Secondly, Italian luxury firms must learn to embrace technology to improve the retail experience and improve global CRM. Chinese consumers are decidedly younger and more connected than Italy understands. Providing in-store wifi and offering more opportunities to engage with the brand via social platforms like WeChat (which virtually every Chinese visitor will use before, during and after her travels) can significantly impact sales and loyalty. Most firms confuse powerful tools like WeChat as promotional, “push” communication tools relegated to PR firms and deployed for the China market. In fact, platforms like WeChat should be leveraged in Italian boutiques as well, as they are very effective ways to engage with traveling tourists for CRM and even m-commerce.

Whether they’re ready or not, Italian luxury firms will most certainly see more Chinese shoppers in the years ahead. Successful firms will need to adopt a strategic view of tourism in the context of overall global China market development. By devising a well-organized strategy and deploying relevant tools and technology, Italian firms stand only to win by engaging–and delighting–the Chinese consumer, whether she is in Beijing or Milan.

Avery Booker | 23 February 2015

Long overshadowed as an aspirational destination by neighboring France, Spain is finally coming into its own among experiential Chinese tourists. Although Spain’s 288,000 mainland Chinese visits last year were a drop in the bucket compared to France’s 2 million, Spain did see an impressive 14 percent leap year-on-year in 2014. More importantly for Spanish retailers, Chinese tourists have become the biggest foreign spenders in Spain, supplanting Russians for the first time ever last year and accounting for nearly one third of total tourist revenue.

This is obviously good news for luxury brands and retailers, but is Spain really ready for this rising tide of Chinese visitors? In recent years, many brands have added Mandarin-speaking staff to Madrid boutiques and “starter-level” measures like Chinese-language signage and printouts, and some museums and restaurants have added similar brochures to help guests navigate exhibitions and menus. Hotels, too, have gotten in on the game, adding Chinese TV stations and menu items like dim sum and congee that have become de facto among most major hotel chains worldwide.

Despite these strides, Spain has a long way to go before it can compete head-to-head with France or even Italy when it comes to attracting and catering to Chinese travelers. The Spanish government seems acutely aware of this, with prime minister Mariano Rajoy announcing plans to process visa applications within 48 hours last September, and more recently engaging in discussions with Asian airlines to attract more traffic to Madrid’s airport. However, it’s an uphill battle for Rajoy, as Air China is the only Chinese airline offering direct flights to Spain, and only seven times per week. This means Spain remains a relatively out-of-the-way destination compared to France (70 flights per week) or Germany (87). With most Chinese travelers still visiting several European countries as part of organized tour packages, getting to Spain is a time-consuming detour for all but the more motivated tourists.

In addition to a dearth of direct flights, visas remain a hurdle in China, with only three Spanish consulates in China able to issue tourist visas. Even more annoying, applicants in China are required to retrieve their visas in person, which may dissuade those from inland second- and third-tier cities. (For comparison, France offers home delivery of visas, and the US lets applicants pick them up at bank branches nationwide in China.)

However, there are signs that a growing number of Spanish destinations “get” the China market and — despite all of the challenges — are figuring out ways to engage and excite travelers. As has been the case in countries like France, South Korea, and the US, this charge is being largely led by major retailers. In Spain, department store chain El Corte Inglés has actively catered to the market by offering tailored services for Chinese visitors, among them a Chinese-language gift guide and high-end Chinese restaurant, and has worked with Chinese celebrities and online influencers to establish itself as a must-see in China.

Instead of waiting for the visa or direct flight situation to work out, retailers and tourist destinations themselves need to take the initiative to attract China’s growing legions of independent, younger travelers, who — if the offering is aspirational enough — will see the effort as reasonable if the experience pays off. It’s worked in France, it’s worked in the UK, and it’ll work in Spain.

Avery Booker | 16 February 2015

For the better part of a decade, most major luxury brands have used the Lunar New Year holiday as an opportunity to engage Chinese consumers through localized, limited-edition items. However, owing to plummeting luxury consumption within mainland China — which has only been worsened by the ongoing anti-corruption crackdown — and a decidedly more low-key turn among a growing number of urban consumers, the red-and-gold dragon-themed Ferraris of 2012 are a far more difficult sell in 2015.

However, it’s not just luxury brands that are getting in on the Chinese New Year action. Destination restaurants, too, have “gone for the gut” to attract China’s international tourist-shoppers in Europe and the US. (An easier sell, given the central importance of food in Chinese culture, particularly around the holidays.) An example is London’s Hakkasan — which operates branches in cities like New York, Dubai, and Las Vegas — which is currently running a Chinese New Year “Wishing Tree and Festive Feast.”

Comprising a nine-dish menu and “wishing tree” activity (in which guests are invited to write new year’s wishes on special ribbons that are hung throughout the restaurant), Hakkasan infuses Chinese cultural elements rather than awkwardly shoehorning them in. Sister restaurant HKK is also holding a 10-course “Culinary Journey Through China” this month, inspired by the cuisines of a range of Chinese provinces, which engage guests via professionally designed one-off menus they are encouraged to take home after the meal.

Like afternoon tea — which has become a major selling point among Chinese tourists at shopping and hotel destinations in Europe and the US — themed culinary efforts like those launched by Hakkasan and HKK reflect the kinds of tailored gestures that China’s affluent traveling consumer actually appreciates (and spends on). While everyone can see a flashy Year of the Dragon Ferrari, gold Year of the Rabbit Tiffany necklace, or Year of the Sheep Panerai, cuisine is both private and highly culturally resonant, giving upscale restaurants worldwide an edge amid China’s current “stealth wealth” climate.

Avery Booker | 11 February 2015

For years, the stereotype of the traveling mainland Chinese consumer has been a group-tour attendee who spends next to nothing on two-to-three-star accommodations, eats at low-end Chinese buffets…and drops thousands at luxury boutiques around the world. Stories abound of frustrated luxury hotels in Manhattan watching as big-spending VIPs clear shelves on Fifth Avenue then promptly board buses back to budget hotels in New Jersey. As the New York Times wrote last fall:

Tour operators who specialize in bookings for Chinese say there are two main areas where Chinese tour operators look for hotel rooms in New Jersey, one around the Newark airport, the other along the New Jersey Turnpike around the exits for North Brunswick and Edison. They appeal to tour wholesalers booking groups that have spent a day in places like Washington or Philadelphia and plan to spend the next day in Manhattan.

This trend of Chinese tourists — whether ultra-rich or solidly lower-middle-class — scrimping on sleep and splurging on luxury has, perhaps rightfully, been bewildering for leading brands, retailers, and hoteliers. Despite large-scale marketing efforts in mainland China and highly publicized Chinese tea, breakfast, and slipper additions, anecdotal evidence among Manhattan luxury hotels suggests that Chinese guests continue to make up a relatively small portion of their business — and those who have been the most loyal customers remain business travelers rather than tourist-shoppers.

However, recent investments by Chinese companies indicate that these frustrations may be premature, and Chinese guests will, in time, see luxury hotel stays as equally important to the travel experience as their Western and Japanese counterparts.

Fueled by the loosening of government restrictions on Chinese companies investing abroad, a simmering trend of luxury hotels acquisitions by Chinese players has grown to a boil over the past year. In October of last year, China’s Anbang Insurance Group Co. announced that it would purchase New York’s iconic Waldorf-Astoria hotel for $1.95 billion, and high-profile real estate and entertainment juggernaut Dalian Wanda Group Co. paid $900 million last year for a skyscraper (which hosts a luxury hotel) in Chicago last year. In the last 12 months alone, other Chinese investors have spent heavily on high-end hotels in far-flung locales such as LA, Washington DC, and Sydney.

Most recently, China’s Sunshine Insurance Group agreed to pay a whopping $230 million for the Baccarat Hotel in New York — more than $2 million per room. This makes the Baccarat the most high-value hotel property ever, just edging out the $2.04 million paid in 2012 by the Sahara Group of India for the Plaza Hotel in New York.

As real estate broker JLL told the Wall Street Journal, it expects Chinese companies to spend more than $5 billion on overseas hotel investments this year, up from $920 million last year and $130 million in 2012. In addition to boosting and diversifying their overseas holdings — and the obvious prestige that comes from high-profile hotel and real estate acquisitions around the world — many of these companies are investing in what they expect to be a future influx of Chinese guests.

According to a 2014 Hotels.com study, Chinese tourists under the age of 35 are becoming more open to the idea of opting for luxury accommodations, as are individual travelers — who are gradually displacing the once-dominant group tourists in terms of volume, length of stay, and overall spending. Once these tourists “graduate up” to luxury accommodations, the logic goes, Chinese-owned high-end properties may feel they have a leg up on the Western competition. (Being able to better add the features Chinese tourists care about, and leverage vast networks within China — particularly in the case of Dalian Wanda.)

For their part, American and European chains continue to angle for Chinese travelers via localized efforts — to continued mixed results. As Mark Podolski, director of sales and marketing for Pacific Palms Resort in California told the LA Times, ”We try to pamper [Chinese guests] as much as we can,” adding that the hotel has added special Chinese-focused perks such as teakettles and slippers on the entire eighth floor. However, the question remains, “will they care?” Ultimately, it very well could be Chinese hotel owners with an international presence that provide the answer.

Avery Booker | 02 February 2015

As luxury brands look to mitigate a significant slowdown in sales in mainland China, which registered negative growth last year for the first time ever, the country’s e-commerce market remains an attractive opportunity as well as an ongoing challenge. Often fearful of diluting brand value while still looking to boost return on investment in a tough but crucial market, brands must walk a delicate tightrope.

Despite any reservations about e-commerce in China — from the near-futility of fighting a vast gray market to the fact that Chinese consumers are relatively new to big-ticket online purchases — there’s no denying its importance. China is the world’s largest e-commerce market, and according to the Ministry of Industry and Information (MIIT), online transactions leapt some 20 percent year-on-year in 2014, reaching 12 trillion yuan (US$1.96 trillion).

Meanwhile, bricks-and-mortar retail remains a critical touchpoint for brands to reach and influence consumers, despite the fact that in-country sales are tepid, rental costs are high and rising, and staff retention rates are dismal. Consumers continue to do a significant amount of pre-purchase comparison shopping offline, particularly in the cosmetics segment. This adds another layer of difficulty to market entry for smaller Western brands, as those that have undertaken an e-commerce-only market entry strategy have yet to take off in a significant way.

This puts brands in a continued tough position: they need some form of offline touchpoint if they’re to achieve widespread success in China, yet many — if not most — bricks-and-mortar locations are likely to remain expensive showrooms, with the majority of affluent consumers continuing to make big-ticket purchases abroad for a litany of reasons.

Over the past year, most e-commerce efforts among major Western players has centered around Alibaba’s wildly popular Tmall, which in 2014 enticed big names like Burberry, L’Occitane, Rimowa, and Estée Lauder by offering to purge counterfeit and gray-market items. This carrot-and-stick approach clearly assuaged lingering brand concerns, as did the platform’s central position in the market. Since 2011, Tmall sales have increased more than tenfold, reaching $50.9 billion last year. And while Tmall alone is not the answer, when added to a comprehensive omnichannel strategy that includes overseas “China-Readiness” and offline engagement in mainland China and Hong Kong, it can help brands buy some time and make some much-needed domestic sales.

China Luxury Advisors and Covington invite you to a seminar and evening reception on the challenges of online versus bricks-and-mortar for luxury brands on February 5 in London. Panel speakers include principals from China Luxury Advisors, Bloomberg, Yoox, and Rapisardi Intellectual Property. Click here to RSVP.

Services

China Luxury Advisors Services include:

China Market Entry

China Luxury Advisors works with brands to enter the China market—from assessing the market opportunity to finding and vetting distributors to assisting in set-up and inception of a China entity.

In-Store Training

China Luxury Advisors works with luxury retailers to provide targeted training for store staff to better understand the Chinese consumer and develop targeted tactics to attract, convert and retain these valuable consumers.

China Strategy Workshops

China Luxury Advisors works with clients to contextualize the Chinese consumer opportunity, facilitating internal workshops, training and strategy sessions to align thinking around the unique nature of the Chinese consumer market.

Luxury Consumer Engagement

China Luxury Advisors works with brands to create custom consumer engagement opportunities that drive traffic and build consumer understanding of a brand’s heritage and history in their home country.

Chinese Outbound Traveler Strategy

China Luxury Advisors works with luxury brands to develop comprehensive strategies to attract, convert and build loyalty with Chinese consumers as they travel around the world.

In addition to the above services, China Luxury Advisors partners with its extensive network of practitioners to offer a wide range of advisory services for luxury brands seeking assistance with this unique and often challenging market.

Team

China Luxury Advisors' team includes a roster of experienced China operators and strategists.

Sage Brennan

Co-Founder

Sage first visited China in 1987, and has been studying and speaking the language and culture ever since. He has worked in China as a researcher, investor, entrepreneur, journalist and advisor, with a specialization in digital, mobile and strategy.

Sage contributed the weekly “Sage Brennan’s This Week in China” column to Dow Jones’ MarketWatch for two years, and remains a frequent commentator on China-related media and technology issues in print media and on programs such as CNBC’s Asia Squawk Box, Wall Street Journal and others.

Sage is a founder and curator of the Shanghai chapter of MobileMonday, with over 3,000 participants, and founded the TEDxShanghai chapter. He is also a regular speaker on China at conferences such as SouthXSouthwest, AdTech and others. A native of Boston, Sage holds both an MBA and an undergraduate degree in International Studies from the University of North Carolina at Chapel Hill, and harbors a lifelong passion for Mandarin and China.

Renee Hartmann

Co-Founder

Renee has been working and living in China since 2000, with a specialty in understanding and selling to the emerging Chinese consumer. She has worked as a brand owner, retail operator, consumer researcher, public relations specialist and market entry strategist in China.

Renee was co-founder of Shanghai-based apparel brand, Eno, and served as its COO and CFO for more than five years. Renee led the company’s fundraising efforts, which resulted in raising more than US$8 million from venture capital and angel investors. She oversaw Eno’s groundbreaking marketing practice, resulting in the company’s recognition as one of the Top Ten Most Innovative companies in China by Fast Company in 2010.

Renee holds a BBA from Emory University’s Goizueta School of Business, and an MBA from Duke University’s Fuqua School of Business. She holds the Chartered Financial Analyst designation, and was named one of CNN’s “Top 20 People to Watch in Shanghai” in 2010. Renee has operated and lived in China for more than ten years and speaks Mandarin.

Philip Guarino

Director Europe

With business experience in more than 40 countries and travel to over 70, Philip brings both unique perspective and practical insight to the benefit of growing businesses. He has held numerous leadership positions in international business development and strategic planning in a variety of industries in the US, Europe and Latin America- both in corporate management and as an entrepreneur.

Philip graduated from Harvard College in 1992 with an A.B. in Government (International Relations) cum laude, where he was also the recipient of the John Harvard and Harvard College awards for academic achievement. He received a Masters in Business Administration from the Wharton School of the University of Pennsylvania in 1998 with a specialization in Entrepreneurial Management. He also completed adjunct studies in International Relations at the Universidad de Belgrano in Buenos Aires, Argentina (1990) and in business administration at the SDA Bocconi in Milan, Italy (1997).

Philip is fluent in five languages (English, French, Italian, Spanish and Portuguese) and is an avid- and intrepid- traveler.

Avery Booker

Partner

With a decade of experience working in the Greater China market, specializing in luxury branding, new media, and trend forecasting, Avery Booker has closely watched and chronicled the emergence of the global Chinese luxury consumer on the world stage.

A fluent Mandarin speaker, Avery was the founding Editor-in-Chief of Jing Daily, the leading bilingual digital publication focusing on the business of luxury and culture in China. Building the publication from the ground up, Avery profiled key trends and interviewed the top players in China’s luxury and arts industries.

More recently, Avery was Vice President of Marketing at Bomoda, a leading Chinese-language luxury fashion newsletter and multiplatform app aimed at China’s global fashion explorer, launching Bomoda’s social platform on-the-ground in Beijing and Shanghai. Avery is a regular contributor of quotes and articles to publications such as the Atlantic, the Guardian, Monocle, and Quartz. Avery holds an M.A. in New Media from New York University, a B.A. in English from the University of Colorado at Boulder, and Mandarin certification from Beijing Language & Culture University.

Charlie Gu

Account Manager

Charlie Gu is a communications strategist with professional experience in global PR firms, nonprofit organizations and Fortune 500 companies. Fluent in Mandarin, English, (some French) and three other local Chinese dialects, he possesses a deep understanding of the Chinese culture, especially the diversity that is inherent within segments of the Chinese community.

Charlie is responsible for crafting and executing Chinese tourism marketing strategies for Beverly Center, a premier fashion destination in Los Angeles. At Beverly Center, Charlie helped launch a series of China-Ready tourism initiatives including a Chinese tour guide reception and Weibo account, and kick-started a partnership with key Chinese student groups in Los Angeles.

Before joining the CLA Team, Charlie worked at David Lang & Associates, a boutique public relations firm specializing in Asian community outreach and public affairs in Los Angeles, managing clients including Alameda Corridor East Construction Authority, LA Metro, Southern California Association of Governments and Hong Kong Tourism Board. Charlie has also worked for international PR firms including Weber Shandwick (in London) and Golin Harris (in Shanghai and Los Angeles), serving clients in a spectrum of industries from healthcare, government entities to food and international luxury brands.

Charlie holds a Master’s Degree in Strategic Public Relations from the Annenberg School for Communications at the University of Southern California, and a B.A. in Journalism from Shanghai International Studies University.

Evelyn Li

Business Development Manager

Evelyn is a communications specialist with professional experience in media, public relations and marketing. At CLA, Evelyn spearheads business development with key Chinese partners, including tour operators and guides, VIP groups, private clubs, strategic media, influencers, designers and stylists.

Prior to joining CLA in 2012, Evelyn worked at Harper’s Bazaar Magazine in Beijing where she worked on both the editorial and events sides, interacting with top Chinese celebrities and entrepreneurs and covering fashion trends in China. Evelyn also held internship positions at Central Saint Martin in London and Toyota in Los Angeles.

Evelyn holds a Master of Arts in Global Communication from the University of Southern California, a Master of Science in Global Media and Communications from the London School of Economics and Political Science, and a B.A. in Advertising from both Jilin University in China and Kyushu University in Japan. She also earned a Fashion Magazine Business Certification from Central Saint Martins College of Art & Design.

Evelyn is from China and speaks fluent Mandarin, English and Japanese.